Austerity has not worked in Ireland or across the eurozone, writes Joan Collins, who points out that even the architects of our bailout admit it was the wrong path.

THE FINE GAEL/LABOUR government has just completed its second year in power. According to the government Ireland is on track to successfully exit its bailout programme in 2014 and return to borrowing in the international sovereign bond market at affordable interest rates. According to the government, the banking crisis has been largely resolved.

The task now is to make the remaining Irish banks profitable and lay the basis for selling off the state’s shareholdings in them. Alternatively they are looking to the ESM in Europe to buy these shares as part of a deal with the EU Commission/ECB.

The austerity spin

Unemployment has been stabilised, again according to the government, with a small increase in the numbers at work last year. The fiscal deficit targets laid down by the IMF, EU Commission and ECB troika will be met this year, and in 2014 and 2015.

It is entirely possible that this, exiting the bailout, will happen, with the IMF and the ESM providing some sort of guarantees against possible default. It is also possible, but not guaranteed, that some concessions will be made to Ireland in terms of its bank bailout costs to assist in this process.

All of this fits neatly into the spin of Ireland as the poster child of austerity, whether from the Irish government, the New York Times, the Troika and the various other advocates of austerity as a solution to the crisis.

But is any of this true? Even if Ireland formally exits the bailout in 2014, in reality it will mean nothing. The banks will remain in crisis. There will still be mass unemployment and emigration. Austerity will continue and the economy will remain in depression. The re-entry to the bond market could be very temporary, depending on events in Greece, Italy, Spain or Portugal, or an escalation of the unresolved banking crisis in the EU, or other negative developments in the world economy.

Growth predictions fall short

Even the IMF are now raising the obvious problem that without growth the level of debt is unsustainable. The government is predicting growth of 3 per cent in 2014 and 2015. But it predicted growth of 2.5 per cent in 2012; the reality was less than 1 per cent. The economy sank like a stone between 2008 and 2010, and has been stagnant since. If this continues the debt to GDP ratio could be 150 per cent by 2020.

Ashoka Mody, who led the initial IMF team in Ireland, has now estimated that the yearly growth rate of 5 per cent from 2001 t0 2007 was based mainly on construction and banking. Take out these sectors and the actual growth rate was 1 per cent. If this is correct, there is very little chance of growth now above 1 per cent.

Austerity has not worked in Ireland and it is certainly not working across the eurozone where over 19 million people are unemployed. Some 27 million are jobless in the EU as a whole. The jobless rate for under 25s has reached a staggering 60 per cent in Greece and Spain.

Austerity will only be defeated if there is resistance

Some lip service is now being paid to the need to stimulate growth and create jobs – but it is only lip service. Working people cannot sit back and wait for our lords and masters to change direction. The policy of austerity will only end when it is confronted by a mass movement of resistance. The traditional organisations to which working people would have looked to lead this resistance, Labour, Socialist and Social Democratic parties, along with the trade unions have played a rotten role in this crisis. In many countries, including Ireland, these parties are in government and forcing the cost of the crisis onto those who can least afford it.

Working people now have to re-organise and find a new voice in order to fight back. There is also an urgent need to develop a viable alternative to austerity. Our position in the ULA is that the rich, those who created the crisis, must be forced to shoulder the burden. This can be done through a wealth tax on assets, a financial transaction tax, increased taxes on profits and very high incomes, and in particular making these taxes effective.

There is no point having high nominal taxes which the wealthy and big multinationals can avoid paying. The reality is now that the major part of the deficit, the difference between what the government takes in and pays out, is made up of the interest payments on the national debt. €64 billion of the debt was incurred bailing out the banks. We should refuse to repay that debt.

The real purpose of austerity

In addition to these measures, economic growth and job creation are essential to get out of the crisis. But we face a situation where the banks are refusing to lend and capitalists are refusing to invest. In this situation the state has to step in; the banks should be taken into full public ownership and democratic control. An emergency job creation programme must be undertaken by the state. Over 100,000 jobs could be created directly by developing our forests, green energy projects, retro-fitting all public buildings to make them energy efficient and developing social and economic infrastructure.

In my opinion, it is absolutely crucial to also go beyond measures to alleviate the crisis for working people. The capitalist class have seized on this crisis to attack the gains made by working people in past struggles. This is the real purpose of austerity; to drive down wages, to attack the concept of job security, of the right to a decent pension, workplace rights, welfare, public health care and social services in general.

A system which cannot tolerate even these basic concessions to working people in the advanced capitalist countries, while condemning hundreds of millions around the world to absolute misery, can no longer be tolerated. It has to replaced by a system based on solidarity, real democracy, and real equality, both social and economic .

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